Ever wonder how much you spend at the convenience store down the street? Just how much you are spending there each month on apples, donuts and milk? Alternatively, how about at the coffee shop that's on your way to work each morning?
The odds are good that you have no idea how much you spend on these discretionary purchases each month. Sure, you probably know that you spend too much on them. However, you probably don't know how much is too much.
This is where it gets handy to track your spending. It gives you a clear picture of where you are spending your dollars each month. It also provides you with clues as to why you seem to break your household budget month after month.
Tracking your spending is not always the most enjoyable activity. It can even prove embarrassing depending upon where you are spending the majority of your dollars. However, tracking is also an important step toward getting your spending under control. You cannot curb your overspending if you do not first know where your dollars are going.
The benefits
The main reason to track your spending? It is an excellent way to change bad, and costly, habits.
For instance, you might discover that you've spent more than $500 in fast-food and carry-out purchases. That is a significant amount of unnecessary spending. Much of that money could have been put to better uses. If you even saved just $100 of that dining-out money in an interest-yielding savings vehicle, just think of how much better off you'd be financially.
Once you track your spending, you'll be able to recognize and change these bad habits. Maybe instead of wasting money on a fast-food hamburger on the way home from work, you'll instead eat the leftover spaghetti in your refrigerator.
We often think of ourselves as having no control over our money. When you track every cent that you spend, though, you are the one who gains control. You learn where your money goes, and you gain the knowledge you need to make better spending decisions.
How to track
Financial experts agree if you decide to track your spending, track it down to the last penny.
That may seem like a challenge. However, it is the only way to understand where your money goes each month. It is too easy to forget those five candy bar buys during a month. If you write down each of these $2 purchases, you'll see just how much money you are spending on sweets each month.
The best method for tracking spending is the one that works best for you. For some, the old-fashioned pen-and-notebook approach works best. When you make a purchase, you just open your notebook and jot down what you spent and what you spent it on.
Others might prefer to enter their spending each night in a text or Word file on their computer, while others might choose the spreadsheet route. Others might track their daily spending using an app on their smartphone or tablet.
The tools that you use to track your spending do not matter. Tracking it does.
After you make a purchase, ask for a receipt. This is important. If you do not get a receipt, you might forget what you bought. You'd be surprised at how quickly this can happen, especially with small purchases.
At the end of the day, gather your receipts. Then write them down, either electronically or with pen and paper. If you do not want to do this every day, then resolve to write down your spending at least every week. The longer you go without writing down your purchases, the more likely you are to abandon your efforts to track your spending. You might also lose several receipts, leaving you with an inaccurate picture of your spending habits.
Once you start tracking your spending, you’ll likely be surprised how much you spend and where you have opportunities to save. Saving three dollars a day on coffee can mean hundreds of dollars in your pocket. Saving five dollars a day by bringing your lunch to work can mean even more.
The lesson here? Your dollars might be going to unexpected places. If you do not track spending, though, you'll never know why you are short on cash each month.